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CONFIDENCE AMONG Australian employers has dropped for the first time in two years, according to a national survey.

It found that 40 per cent of employers indicated an intention to increase their permanent staff levels during the April–June 2008 quarter. The result is a 5 percentage point drop in confidence from the record high level in the first quarter of this year.

This result represents the first drop in national employer confidence following eight consecutive quarter-on-quarter increases.

“While this is the first decline in sentiment in two years, Australia’s employment market remains extremely strong with close to 40 per cent of employers looking to increase staff levels over the coming quarter,”said Gary Lazzarotto, managing director of Hudson Australia/New Zealand, which conducted the survey.

“There has been an expectation for some time that factors such as ongoing interest rate rises, turbulence in global financial markets, increasing credit costs and considerable share market volatility could impact employer confidence.”

A global study conducted by the Hay Group also found that while a majority of international companies have not fully felt the impact of the current economic events, 16 per cent of them expect their business results to be significantly worse than budgeted levels.

However, only 7 per cent of Australian and New Zealandorganisations responding expected results to be significantly worse.

The study, which spanned 1,003 companies in 80 countries including Australia, found that more than 30 per cent of international organisations are considering freezing base salaries.

“Even more alarming, 15 per cent of global organisations reported that they were freezing salaries for all employees,” said Tom McMullen, vice-president at Hay Group.

“Short of layoffs or salary cuts, this is as serious as you can get in terms of sending out distress signals.”

While concerning, locally the perception is more positive, with only 18 per cent of organisations considering a salary freeze.

“The implications of the survey are that leaders in local organisations feel more positive about the outlook when compared to the overall response from the global survey,” said Richard Hardwick, managing director of Hay Group Pacific.

“Despite this optimism, there is still apparent caution among local organisations which is reflected in the survey findings” he said.

In Australia the fear of recession wasn’t rated as one of the top two issues facing companies. Instead recruiting and retaining skilled workers in the competitive labour market and paying competitive wages were the big issues.

The survey showed that 30 per cent of local companies have either made changes or are making changes to their high performer retention programs.

It also found that 26 per cent of local organisations are deliberating changes to their short-term incentive programs, while 30 per cent are considering or have implemented changes to training and development.